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Long Beach in the midst of a 'steady, mediocre expansion,' economist says

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Long Beach and the rest of the nation appear to be in better economic shape than the presidential candidates and other committed “miserabilists” would have people believe, economists said Friday.

“The expectations don’t seem to match the reality,” economist Wade Martin said Friday after his remarks at the 2016 Regional Economic Forum at Cal State Long Beach.

Martin and Beacon Economics co-founder Christopher Thornberg — the latter of whom employed the term “miserabilist” to describe the likes of melancholy singer Morrissey, Wall Street traders who thrive upon volatility and presidential candidates hyping voters’ anxieties — presented a case that key data show an economy that is probably healthier than naysayers believe.

That doesn’t mean Martin and Thornberg are betting on the next boom being right around the corner, but Thornberg was fairly upbeat for an economist whom the media often labeled a “doomsayer” for his pre-recession warnings.

“We are in the middle of a nice, steady, mediocre expansion,” Thornberg said.

The Long Beach forum took place one day after the Commerce Department released preliminary data showing U.S. gross domestic product grew 0.5 percent during the first three months of this year. GDP grew at a 1.4 percent rate during the fourth quarter of 2015.

The nation’s GDP, seen as the broadest measure of economic health, represents the dollar value of all goods and services produced in a specific time period.

Long Beach data

Citing Long Beach-specific numbers, Martin said the professional and business services sector has grown at a faster rate — 5.6 percent — than other employment sectors. The sector does not represent the largest classification of working people; the top three are health care, leisure and hospitality, and government. But Martin said “it’s a very positive sign” to see growth among relatively high-paying occupations.

Among other indicators, Martin presented data showing that although Long Beach’s office and industrial vacancy rates are higher than the overall Los Angeles County rates, local vacancies have declined.

The addition of new office space to the local market between 2013 through 2015 explains why Long Beach’s office vacancy rate of 15.8 percent in the fourth quarter of 2015 exceeded the county’s slightly lower rate, according to Martin’s research. Additionally, the growth in the professional and business services sector has occurred at the same time as cutbacks within the information and financial sectors.

The data show an uptick in retail vacancies in the final quarter of 2015, although the 6.1 percent retail vacancy rate was still below rates of roughly 7.5 percent observed during late 2013 and early 2014.

On the subject of residential real estate, Martin’s data show Long Beach home prices rose to a median of $530,300 during the final quarter of 2015, signifying a 12 percent year-over-year increase. That amount is nearly 4 percent below the pre-recession peak in Long Beach, but the report from the campus and Beacon Economics also states prospective buyers now have an easier time buying a Long Beach house as a result of low interest rates and income growth.

Apartment rents are also on the rise throughout Long Beach. Rents grew at a 4.7 percent clip in east Long Beach over the course of 2015. Rents also rose 3.3 percent and 2.9 percent, respectively, in the city’s western and northern neighborhoods.

The report prepared for Friday’s event attributed the increases to high demand and the absence of a rent-control law in Long Beach.

State and nation

Thornberg, who focused on the California and U.S. economies, said the Golden State is indeed unfriendly to businesses and even has what he called a “stupid” approach to tax policy. He also proposed, however, that Sacramento’s unfriendliness to business owners is not a key driver of the California economy and that wealthy people move from Texas to California, not the other way around.

If California should ever emulate the Lone Star State’s fiscal policies, Thornberg said the way to do so would be to get rid of Proposition 13 and follow Texas’ example of funding government through stiffer taxes on property instead of income.

California’s Proposition 30-style tax-the-rich approach may feel good to some people, but he said the outcome is to leave California government dependent upon the volatility of high-income taxpayers’ earnings.

Thornberg also attacked the recent push for a $15 minimum wage, a proposal that state and Long Beach officials have embraced. Thornberg maintained that research shows higher wages don’t help people climb out of poverty since the costs of higher wages fall upon the likes of seniors living on a fixed income and low-skilled workers who have a harder time finding work at higher pay rates.

He said government could do more to help the poor by expanding pre-kindergarten education, but maintained that politicians are too scared to figure out how to enact and pay for improving the educational system.

“They’d rather pretend to do something with a policy that is known not to work,” he said.